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British chancellor uses his first Autumn Statement to scrap it

British Chancellor Philip Hammond delivers his Autumn Statement in the House of Commons, London | Image: PA Wire/PA Images

13:50 23 Nov 2016
Newstalk
13:50 Wednesday 23 November 2016

The British government has announced plans to cut its corporation tax rate from 20% to 17%.

The British Chancellor of the Exchequer, Philip Hammond, has also slashed the forecast growth for next year - admitting his government can no longer deliver a surplus in 2019/20.

He said that GDP growth in 2017, the year the UK is expected to begin the process of leaving the European Union, is now expected to be just 1.4%.

This is down from the 2.2% previously forecast by the UK Office for Budget Responsibility.

Mr Hammond told MPs: "That's slower, of course, than we would wish, but still equivalent to the IMF's forecast for Germany, and higher than the forecast for growth in many of our European neighbours, including France and Italy."

Explaining why he was abandoning his predecessor's promise of a 2019/20 surplus, Mr Hammond said: "In view of the uncertainty facing the economy, and in the face of slower growth forecasts, we no longer seek to deliver a surplus in 2019-20.

"But the prime minister and I remain firmly committed to seeing the public finances return to balance as soon as practicable, while leaving enough flexibility to support the economy in the near term."

Mr Hammond also announced that he will abolish the Autumn Statement and move the main budget statement from the spring to the autumn.

"This is my first Autumn Statement as chancellor - after careful consideration and detailed discussion with the prime minister, I have decided it will also be my last.

"Mr Speaker I am abolishing the Autumn Statement. No other major economy makes tax changes twice a year and neither should we.

"Starting in autumn 2017, Britain will have an autumn budget - announcing tax changes well in advance of the start of the next year".

The chancellor said the UK's decision to leave the EU will "change the course of Britain's history" and "makes more urgent than ever the need to tackle our economy's long-term weaknesses" including the productivity gap.

The new draft Charter for Budget Responsibility has three fiscal rules - return public finances to balance "as early as possible in the next parliament", cyclically adjusted borrowing below 2% by end of this parliament; public sector net debt falling as share of GDP by end of parliament; and welfare spending within a cap.

Also, Mr Hammond said that the controversial triple lock on pensions would stay until the end of this parliament.

Corporation tax will also be cut to 17% and tax savings on salary sacrifice and benefits in kind will be stopped, with exceptions for ultra low emission cars, pensions, childcare and cycling.